Unraveling the privacy vs. personalization paradox

With operators hungry for new revenue streams, and keen to remodel themselves in the digital world, there is a concerted push to leverage their most valuable asset – customer data.

Operators want to differentiate themselves as digital service providers, and go head to head with the likes of Google and Facebook in delivering compelling customer experiences to their subscribers. The established customer insights that they could draw on, including established billing relationships, location data and Internet history, could give them a real edge in this fight.

As operators look to compete in this intensely competitive market, it is interesting to look at their different digital transformation strategies – in particular, their approach to monetizing customer data. While some operators have embraced new business models that capitalize on their established customer relationships, others have avoided this approach for fear of encroaching on subscribers’ privacy.

But this debate over privacy and personalization throws up a fundamental paradox: it is only by accessing personal data that operators and their partners can deliver truly valued personalized services. This is something we all understand is the case, and we are happy to benefit from privacy in exchange for personalization… when it’s done well.

Two UK operators highlight the gulf in approach to personalization vs. privacy: Whilst Three is still trialing network-based ad blocking, Tesco Mobile is embracing a Sponsored Data model. The operator recently announced its partnership with Android app Unlockd – giving customers money off their phone bills (and a free 200MB data each month) in exchange for receiving targeted content from selected brands and publishers, as well as ads. The program is currently only available to Android users. Apple has blocked ads on its iOS9.

Three says it is persisting with ad blocking – currently in Beta form with 20,000 customers – because subscribers are becoming increasingly frustrated with “irrelevant and intrusive” adverts using up their data allowance, as well as tracking their behavior without their knowledge or consent. Tesco Mobile is calling its partnership with Unlockd ‘Mobile Xtras’ – and obviously sees it as a genuine value proposition for its subscribers. So how can two UK operators have such polar responses to mobile advertising?

It seems as though both operators are trying to improve customer experience, but are coming at it from opposite ends of the spectrum: Three realizes that badly targeted and irrelevant content is just plain irritating for customers – and so has decided to wipe it completely. Tesco Mobile is taking a more measured approach in giving the customers the chance to opt into mobile ads, and actually share in the value exchange (hopefully with decent, well-targeted content and a financial incentive for watching).

Unsurprisingly, Unblockd CEO, Matt Berriman, says that, while threatening to block ads is a high profile way to get publishers and media companies to the negotiating table, it does nothing to address the problem for telcos of diminishing revenues. “Three’s ad blocking plans are reflective of a much bigger industry issue,” he said. “But ad blocking does not offer the value exchange that consumers or telcos are really both seeking.”

In other words, ad blocking is cutting off your revenue stream to spite your bottom line. So are opt-in ad models like the partnership between Tesco Mobile and Unlockd the future? Well, just to complicate things further, the Open Right Group (ORG) has expressed concerns about the Unlockd privacy policy. TelecomsPaper reports that the ORG warned that “poorer customers would be more likely to take up this offer”, and said it did not want a society where richer people can afford to retain their privacy and poorer people give up their privacy to make ends meet.

Privacy Versus Personalization

So it’s back to the privacy vs. personalization argument isn’t it? But if the content Tesco Mobile offers through its Unlockd program is relevant and engaging to subscribers, they’ll stick with it – and make their own judgment over privacy in the process. You can see how a film buff might enjoy watching film trailers (content) and receiving a half price film ticket (offers) – all while getting a discount on their monthly bill (financial incentive). On the flip side, endless 2 for 1 McDonalds coupons would get tedious for a vegetarian – and might not be worth it even for three quid off the monthly bill. Unsubscribe from this program? Tick.

If operators are to succeed in this area, subscribers need to be convinced that the program offers value. Encouraging customer participation is a big challenge, so user experience should be the key focus. This is obviously market-dependent. In Asian markets, for instance, sponsored data programs (where the subscriber is explicitly offered data/ minutes in exchange for watching content) are extremely popular. The incentive is financial – subscribers in China commonly pay per MB – but it’s the customer experience that keeps subscribers hooked.

China Telecom has focused on the end user experience, and has built an enriched ‘gamified’ ecosystem around its Sponsored Data program to support this. One service that has gained traction for China Telecom’s partners and subscribers is its digital currency ‘Niu Coin’, where one coin is equivalent to 1MB of data. Subscribers are eligible for the currency when they participate in China Telecom’s partner campaigns (e.g. downloading apps, doing quizzes, watching ads through China Telecom’s gamified app). China Telecom offers other user-centric features like “Beg Coin” (requesting coins from friends), “Send Coin” as well as multi-step activities to earn coins, in order to encourage regular participation of partner services.

China’s experience shows that data monetization models, such as sponsored data, really can work. However, they must offer the customer something different, and make participating in these programs enjoyable. Then it really is a genuine value exchange – privacy for personalized offers and content. Not so different then from subscribers’ experience of other apps – Spotify, Google Maps, etc. – that all harvest data in exchange for valued services.